Intuitive Surgical, Inc. (ISRG), Caterpillar Inc. (CAT): Are Huge Share Buybacks Enough to Lift These Struggling Stocks?

The Foolish takeaway

It’s no secret that these stocks are in distress. Their industries and operations are in the midst of pronounced downturns, taking their stock prices and investor confidence down with them.

To combat market pessimism and in an attempt to build a floor under the stock price, management teams of these companies have turned to share buybacks.

To their credit, these companies believe their stocks to be undervalued at current prices, and could be making shrewd capital allocation decisions by buying their own stock when it’s low.

As a result, these buybacks are providing investors with a healthy dose of further downside protection to weather the storm until business conditions improve. And, due to their declining stock prices, these stocks can be purchased for low valuations.

Each of these stocks represent a strong underlying business that’s currently facing hard times. But, it seems to me that the challenges each of these stocks face are temporary in nature. Sooner or later, the storm clouds will pass. These compelling buybacks, along with a return of more normal business conditions, means that these stocks should see increasing earnings per share again in the near future. Buy these stocks with confidence.

Robert Ciura has no position in any stocks mentioned. The Motley Fool recommends Intuitive Surgical. The Motley Fool owns shares of Intuitive Surgical.

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